Iran deal sparks hunt for vintage plane parts

Tehran, December 1, 2013

By Tim Hepher, Parisa Hafezi and Praveen Menon

While foreign ministers raced to Geneva for a crucial phase of talks over Iran's nuclear activities earlier this month, passengers with the country's national airline faced a little-noticed drama on the other side of the world.

As a 37-year-old Boeing 747 climbed out of Beijing bound for Tehran, the Iranian crew received a cockpit alert that one of the jumbo jet's four Pratt & Whitney engines was on fire.

The Iran Air pilots shut the engine down, activated a fire suppression system and flew back to the Chinese capital.

Both the Nov. 8 incident and the actions taken to remedy it, as reported by accident database Aviation Herald, highlight the juggling act needed to keep Iran's fleet in the air after years of sanctions and challenges in procuring parts.

The relief plane that was dispatched to pick up stranded passengers is not just a jet but a time capsule, symbolizing the 34-year chill in ties between the United States and Iran.

It entered service weeks before the 1979 hostage crisis and is the only original 747-100 jumbo still flying passengers. Its resale value of $60,000 would not pay for fuel for the trip.

For years, aircraft such as these have been kept in service through parts imported on the black market, cannibalised from other planes or reproduced locally, aviation sources say.

Now, following last week's interim deal to ease a decade-long standoff over Iran's nuclear activities, Tehran will be allowed limited purchases of aircraft parts and repairs.

The immediate problem Iran faces is that some of its aircraft are so old that parts may not be readily available. The 747-100 was first launched in 1966 and Boeing hasn't built a new one since 1982.

"The last 747-100 we saw was about 10 years ago," said Mark Gregory, head of Europe's largest aircraft recycling company, UK-based Air Salvage International.

On paper, Iran's need for parts could be a boon for salvage firms and any second-hand stockists who have had unwanted bits of the oldest types used by Iran accumulating dust for years.

"Everybody is lucky if somebody wants to buy because it is a dead market. These parts don't sell like fresh bread from the baker," said Derk-Jan van Heerden, general manager of Netherlands-based Aircraft End-of-Life Solutions (AELS).

Barring a full lifting of sanctions, the volumes involved are not enough to make much difference to the profits of global aerospace firms and parts manufacturers, analysts say.

But the renewal of old business relationships marks the tentative early steps of a process that could, depending on diplomacy, resuscitate a market frozen in time for a decade.

Iran is already indicating that sanctions relief may plant a seed for future aircraft purchases if economic ties are fully restored. Diplomats caution that depends on the uncertain outcome of months of detailed negotiations that lie ahead.

"With the new deal made in Geneva, hopefully we will be able to purchase parts directly from manufacturers and not from middlemen for a higher price," said a senior Iranian official.

"We are looking forward to the time when sanctions are lifted and then we will purchase 250-400 planes, whether from Boeing or Airbus," he said, speaking on condition of anonymity.

Jetmakers, salvage firms and parts suppliers have responded cautiously and stress nothing can be done without approval. But Iranian officials say people claiming to represent at least one foreign firm have made overtures as the sanctions thaw loomed.

"We will first have to learn about possible changes in the legal situation in detail before we can make any business assessment," a spokesman for Europe's Airbus said.

A spokesman for Boeing declined comment.

Van Heerden, who is also deputy director of the Aircraft Fleet Recycling Association, said the industry has end-user agreements designed to avoid parts being used illegally.

Last week's deal calls for licensing of an unspecified quantity of aircraft parts and services for Iran's fleet.

But the mechanism and timing remain unclear and governments are expected to keep a strict eye on how funds are spent.

"I suspect there will be a tight rein initially on who supplies which parts to Iran. It is in the interests of all the governments and the manufacturers to ensure that there are no issues over the quality of the parts being supplied," said Bill Cumberlidge, executive director of leasing firm KV Aviation.

Items likely to be closely scrutinized include tail parts for the oldest Boeing 747s, which until 1980 were made with depleted uranium as counterweights, until tungsten took over.

An Iranian airline official said carriers were waiting for news on how and where any unfrozen funds could be deployed.

"The first issue would be that of finance and banking transactions. There are many planes out there but the problem has always been that we cannot buy them," he said.

The lack of parts has not prevented Iran Air and three others - Iran Aseman Airlines, Kish Air and Mahan Air - from passing safety audits of the International Air Transport Association.

"Many middlemen provided us with aircraft parts and even once one plane, carrying hundreds of parts, landed at (Tehran) Mehrabad airport," the senior Iranian official said.

"Iran managed to get everything it needed for its airplanes; even some very sophisticated parts."

But there has been a spate of reported incidents involving items with a limited life such as engines and landing gear, and the cost of running a covert re-supply operation has been high.

Parts that Iran might now seek to buy could cost anything from a few dollars for a tray table to millions of dollars for an engine. Airbus and Boeing may themselves have to scour the second-hand market for parts for old jets they no longer have.

In addition to parts, Iranian airlines also urgently need training, said a Dubai-based consultant whose clients include Iranian carriers. Poor training of Iranian pilots on elderly Russian aircraft was blamed for a series of crashes that killed more than 190 people in 2009, leading the Iranian authorities to clamp down on purchases of Russian equipment, he added.

Iran has an active fleet of 189 passenger aircraft with an average age of 22 years. It also has 76 in storage with an average age of 24 years, says UK aviation consultancy Ascend.

The situation for flag carrier Iran Air is worse. Its 37 active aircraft have an average age of 24 years. Two of its active Boeing 747s have been flying for close to four decades.

The fleet includes some planes for which there are ample parts, such as the Fokker 100 and MD-80. Many have been recently mothballed, making their spares relatively cheap.

Others, like the earliest vintage Boeing 747s and the first Airbus A300 aircraft, depend on a shrinking supply of parts or a steady flow of organ transplants from other "donor" aircraft.

"Ultimately the most cost-effective solution for Iran, when sanctions allow, would probably be to upgrade their fleet. There comes a stage when it becomes impossible to support aircraft because of their age," Air Salvage's Gregory said.-Reuters